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On-Sale Bar Clarified for Drugmaker

A patent application should be filed as soon as possible. Not only do patent rights go to the first inventor to file a patent application, but no invention may be patented if it has been publicly disclosed more than a year before an application is filed.

US law applicable to patent applications filed prior to March 15, 2013, that is, before the America Invents Act (AIA) took effect, specifically barred patenting anything more than one year after the first instance of its being sold or offered for sale.

In the case of The Medicines Company (“MedCo”) v. Hospira, Inc., MedCo ordered three batches of the anti-coagulant drug bivalirudin to be made by a manufacturing contractor, Ben Venue Laboratories, using a process that Medco later patented. While the market value of a commercial batch would have been about $10 million, no one could have sold the drug to consumers because FDA approval was still pending at the time.

When MedCo later sued Hospira for patent infringement, one of Hospira’s defenses was that MedCo’s patent application came too late, since it was filed more than a year after MedCo paid Ben Venue to make the preliminary batches for validation purposes.

The policy underlying the “on-sale” bar as it existed in Section 102(b) of the pre-AIA Patent Act was to preclude an inventor from profiting from the commercial use of an invention for a prolonged period before sharing it with the public by filing a patent application. However, the statute sought to give the inventor a “reasonable” time to discern the potential value of an invention before undertaking the patenting process. In 1998, the Supreme Court, in its decision in Pfaff v. Wells Electronics Inc., established a two-part test to determine whether an offer for sale occurred that would bar patenting more than a year later: The invention had to be the subject of a “commercial offer for sale” and had to be “ready for patenting.”

In MedCo, there was no question but that the invention was “ready for patenting.” However, a federal trial judge in Delaware held that allowing the contractor to manufacture the pharmaceutical embodying the invention in batches for validation purposes did not constitute a sale triggering the on-sale bar because it was for experimental purposes. In 2015, a panel of three Federal Circuit judges reversed the district court ruling, concluding that Ben Venue’s contract manufacturing constituted a commercial exploitation of the invention even though there was no transfer of title to the product as would typify a commercial sale.

On reconsideration, the entire Federal Circuit Court of Appeals held that a sale of manufacturing services by a contract manufacturer like Ben Venue was not an invalidating sale where neither title to embodiments of the invention (the pharmaceutical being manufactured) nor the right to market them passed to the manufacturer. Passing of title from seller to buyer for a price is the hallmark of a sale under the Uniform Commercial Code (although the Federal Circuit declined to adopt it as a “talismatic” bright line).

The Federal Circuit also declined to recognize a blanket “supplier exception.” This means instances could arise where the supplier is given authority to market to others the product embodying the invention, in which case transferring that product might bar filing a patent application more than a year later.

The Federal Circuit refrained from answering a related question of whether experimental use after an invention has been reduced to practice is excepted from triggering a one-year deadline in which to file a patent application. It did however suggest that its ruling in MedCo’s favor might have been different had the patent application covered a manufacturing process, rather than a product, and had the supplier used that process in filling the order from MedCo.

The MedCo decision leaves open a host of yet-to-be-addressed issues as to how certain events will be viewed by the courts when invoked as invalidating a later-filed patent application. Under the AIA, for example, it is unclear whether a supplier contract that otherwise constitutes a sale but not a sale “to the public” triggers a statutory bar to subsequent patenting. That question was recently answered in the negative by a New Jersey federal district court judge. An appeal of that decision is pending before the Federal Circuit in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. The US Patent and Trademark Office has filed an amicus brief in support of the judge’s ruling.

The takeaway should remain: if in doubt, file as soon as possible (because rights go to the first inventor to file), and certainly no later than a year elapses after any potentially barring event. If, however, an opportunity to file a patent application is first perceived more than a year after a contract manufacturer has made sample batches for the patentee, it may not be too late to file in the US. In jurisdictions other than the US, by contrast, it might well be necessary to file a patent application before any such event.

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